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Bed Bath & Beyond Inc - Stock Quote BBBY

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Morningstar's Bed Bath & Beyond Inc Stock Analysis

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Bed Bath & Beyond Demand Stalls Amid Constrained Consumer Environment; Materially Lowering FVE

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

We plan to lower our $17.40 fair value estimate for no-moat Bed Bath & Beyond by around 20% after digesting dismal first-quarter results that included a 25% sales decline, a 620-basis-point impact from inventory obsolescence, and a c-suite shake up. A midteens price decline after the print renders shares undervalued, but we caution investors that it could take another two to three quarters before any signs of improvement arise. Commentary that there were issues in inventory, “that we will be working to actively resolve,” implies we are likely to see further inventory write-downs ahead, giving little hope that there is any potential for positive profitability over the near term. The adjusted quarterly EPS loss of $2.83 excludes $1.66 in charges for inventory and port fees, which are unlikely to be replicated, but is still miserably below the $0.05 in positive EPS the firm was able to capture in the year-ago period. The macroeconomic environment was noted as a key factor in purchasing pattern changes, and we surmise Bed Bath is set to be disproportionately impacted by its exposure to a mid- to low-income consumer base that is meaningfully impacted by inflation and acutely sensitive to price.

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Bed Bath & Beyond Inc's Company Profile

Business Description

Bed Bath & Beyond is a home furnishings retailer, operating just under 1,000 stores in all 50 states, Puerto Rico, Canada, and Mexico. Stores carry an assortment of branded bed and bath accessories, kitchen textiles, and cooking supplies. In addition to 809 Bed Bath & Beyond stores, the company operates 133 Buy Buy Baby stores and 53 Harmon Face Values stores (health/beauty care). In an effort to refocus on its core businesses, the firm has divested the online retailer, One Kings Lane, Christmas Tree Shops and That (gifts/housewares), Linen Holdings, and Cost Plus World Market in recent years.

650 Liberty Avenue
Union, NJ, 07083
T +1 908 688-0888
Industry Specialty Retail
Most Recent Earnings Feb 28, 2022
Fiscal Year End Feb 27, 2022
Stock Type Distressed
Employees 32,000

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